Question 1

When convertible bonds are converted to a company's stock,the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Accepted Answer

A) True 
 B)False

Question 2

On January 1,Parson Freight Company issues 7%,10-year bonds with a par value of $2,000,000.The bonds pay interest semiannually.The market rate of interest is 8% and the bond selling price was $1,864,097.The bond issuance should be recorded as:

Accepted Answer

A)  Debit Cash $2,000,000; credit Bonds Payable $2,000,000.
B)  Debit Cash $1,864,097; credit Bonds Payable $1,864,097.
C)  Debit Cash $2,000,000; credit Bonds Payable $1,864,097; credit Discount on Bonds Payable $135,903.
D)  Debit Cash $1,864,097; debit Discount on Bonds Payable $135,903; credit Bonds Payable $2,000,000.
E)  Debit Cash $1,864,097; debit Interest Expense $135,903; credit Bonds Payable $2,000,000.F) C) and D)
G) B) and C)

Question 3

Bonds owned by investors whose names and addresses are recorded by the issuing company,and for which interest payments are made with checks or cash transfers to the bondholders,are called:

Accepted Answer

A)  Callable bonds.
B)  Serial bonds.
C)  Registered bonds.
D)  Coupon bonds.
E)  Bearer bonds.F) B) and E)
G) B) and D)

Question 4

Callable bonds give the issuer the option to retire them at a stated dollar amount before maturity.

Accepted Answer

A) True 
 B)False

Question 5

All of the following statements regarding leases are true except:

Accepted Answer

A)  For a finance lease,the lessee records the leased item as its own asset.
B)  For a finance lease,the lessee amortizes the right-of-use asset acquired under the lease.
C)  Finance leases create a liability on the balance sheet.
D)  Finance leases do not transfer ownership of the asset under the lease,but operating leases often do.
E)  For a short-term lease of a few days or weeks,the lessee records payments as rental expense.F) A) and C)
G) B) and E)

Question 6

The issue price of bonds is found by computing the future value of the bond's cash payments,discounted at the contract rate of interest.

Accepted Answer

A) True 
 B)False

Question 7

On July 1 of the current year a corporation issued (sold)$1,000,000 of its 12% bonds at par.The bonds pay interest June 30 and December 31.What amount of bond interest expense should the company report on its current year income statement?

Accepted Answer

$1,000,000...

Question 8

A company must repay the bank a single payment of $20,000 cash in 3 years for a loan it entered into.The loan is at 8% interest compounded annually.The present value of 1 (single sum) at 8% for 3 years is 0.7938.The present value of an annuity (series of payments) at 8% for 3 years is 2.5771.The present value of the loan (rounded) is:

Accepted Answer

A)  $15,876.
B)  $20,000.
C)  $25,195.
D)  $7,761.
E)  $51,542.F) D) and E)
G) None of the above

Question 9

Periodic interest payments on bonds are determined by multiplying the par value of the bond by the bond's contract rate.

Accepted Answer

A) True 
 B)False

Question 10

A corporation issued 8% bonds with a par value of $1,000,000,receiving a $20,000 premium.On the interest date 5 years later,after the bond interest was paid and after 40% of the premium had been amortized,the corporation called the bonds at $990,000.The gain or loss on this retirement is:

Accepted Answer

A)  $0.
B)  $10,000 gain.
C)  $10,000 loss.
D)  $22,000 gain.
E)  $22,000 loss.F) B) and D)
G) A) and E)

Question 11

Bonds issued in the names and addresses of their holders are ________ bonds.

Accepted Answer

The answer of Bonds issued in the names and addresses...

Question 12

Identify the advantages and disadvantages of bond financing.

Accepted Answer

The advantages of bond financing include...

Question 13

Morgan Company issues 9%,20-year bonds with a par value of $750,000 that pay interest semiannually.The amount paid to the bondholders for each semiannual interest payment is.

Accepted Answer

A)  $60,000.
B)  $33,750.
C)  $67,500.
D)  $30,000.
E)  $375,000.F) All of the above
G) D) and E)

Question 14

On January 1,a company issued 10%,10-year bonds payable with a par value of $720,000.The bonds pay interest on July 1 and January 1.The bonds were issued for $817,860 cash,which provided the holders an annual yield of 8%.Prepare the journal entry to record the first semiannual interest payment,assuming it uses the straight-line method of amortization.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Cash payment: $720,000 * 10% ...

Question 15

On January 1,a company issues bonds dated January 1 with a par value of $300,000.The bonds mature in 5 years.The contract rate is 9%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $312,177.
-The journal entry to record the first interest payment using straight-line amortization is:

Accepted Answer

A)  Debit Interest Payable $13,500; credit Cash $13,500.00.
B)  Debit Bond Interest Expense $12,282.30; debit Discount on Bonds Payable $1,217.70; credit Cash $13,500.00.
C)  Debit Bond Interest Expense $14,717.70; credit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.
D)  Debit Bond Interest Expense $14,717.70; credit Discount on Bonds Payable $1,217.70; credit Cash $13,500.00.
E)  Debit Bond Interest Expense $12,282.30; debit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.F) All of the above
G) A) and B)

Question 16

A contract pledging title to assets as security for a note or bond is known as a(an) :

Accepted Answer

A)  Sinking fund.
B)  Mortgage.
C)  Equity.
D)  Lease.
E)  Indenture.F) B) and E)
G) B) and C)

Question 17

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What amount of principal will be included in the first annual payment?

Accepted Answer

A)  $20,000
B)  $37,258
C)  $25,000
D)  $232,742
E)  $17,258F) All of the above
G) B) and E)

Question 18

The relationship between the market rate of a bond and the rate of return on the borrowed funds affects the company's return on equity.

Accepted Answer

A) True 
 B)False

Question 19

Bonds that give the issuer an option of retiring them before they mature are:

Accepted Answer

A)  Debentures.
B)  Serial bonds.
C)  Sinking fund bonds.
D)  Registered bonds.
E)  Callable bonds.F) A) and D)
G) A) and B)

Question 20

On January 1,a company borrowed $70,000 cash by signing a 9% installment note that is to be repaid with 4 equal year-end payments of $21,607.The amount borrowed is $70,000 and 4 years of interest at 9% equals $25,200,for a total of $95,200,yet the total payments on the note amount to only $86,428.Explain.

Accepted Answer

Payments on an installment note include ...

Exam 10: Accounting for Long-Term Liabilities

Identify the advantages and disadvantages of bond financing.

Correct Answer
verified
The advantages of bond financing include...
View Answer

On July 1 of the current year a corporation issued (sold)$1,000,000 of its 12% bonds at par.The bonds pay interest June 30 and December 31.What amount of bond interest expense should the company report on its current year income statement?

Correct Answer
verified
$1,000,000...
View Answer

Periodic interest payments on bonds are determined by multiplying the par value of the bond by the bond's contract rate.

Correct Answer
verified

Correct Answer
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Payments on an installment note include ...
View Answer

When convertible bonds are converted to a company's stock,the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Correct Answer
verified

Correct Answer
verified

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What amount of principal will be included in the first annual payment?

Correct Answer
verified

Bonds owned by investors whose names and addresses are recorded by the issuing company,and for which interest payments are made with checks or cash transfers to the bondholders,are called:

Correct Answer
verified

A corporation issued 8% bonds with a par value of $1,000,000,receiving a $20,000 premium.On the interest date 5 years later,after the bond interest was paid and after 40% of the premium had been amortized,the corporation called the bonds at $990,000.The gain or loss on this retirement is:

Correct Answer
verified

On January 1,Parson Freight Company issues 7%,10-year bonds with a par value of $2,000,000.The bonds pay interest semiannually.The market rate of interest is 8% and the bond selling price was $1,864,097.The bond issuance should be recorded as:

Correct Answer
verified

Bonds issued in the names and addresses of their holders are ________ bonds.

Correct Answer
verified

The issue price of bonds is found by computing the future value of the bond's cash payments,discounted at the contract rate of interest.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Cash payment: $720,000 * 10% ...
View Answer

Morgan Company issues 9%,20-year bonds with a par value of $750,000 that pay interest semiannually.The amount paid to the bondholders for each semiannual interest payment is.

Correct Answer
verified

Bonds that give the issuer an option of retiring them before they mature are:

Correct Answer
verified

All of the following statements regarding leases are true except:

Correct Answer
verified

A contract pledging title to assets as security for a note or bond is known as a(an) :

Correct Answer
verified

The relationship between the market rate of a bond and the rate of return on the borrowed funds affects the company's return on equity.

Correct Answer
verified

Callable bonds give the issuer the option to retire them at a stated dollar amount before maturity.

Correct Answer
verified

Exam 10: Accounting for Long-Term Liabilities

Identify the advantages and disadvantages of bond financing.

Correct AnswerverifiedThe advantages of bond financing include...View AnswerShow Answer

On July 1 of the current year a corporation issued (sold)$1,000,000 of its 12% bonds at par.The bonds pay interest June 30 and December 31.What amount of bond interest expense should the company report on its current year income statement?

Correct Answerverified$1,000,000...View AnswerShow Answer

Periodic interest payments on bonds are determined by multiplying the par value of the bond by the bond's contract rate.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPayments on an installment note include ...View AnswerShow Answer

When convertible bonds are converted to a company's stock,the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On July 1,Shady Creek Resort borrowed $250,000 cash by signing a 10-year,8% installment note requiring equal payments each June 30 of $37,258.What amount of principal will be included in the first annual payment?

Correct AnswerverifiedShow Answer

Bonds owned by investors whose names and addresses are recorded by the issuing company,and for which interest payments are made with checks or cash transfers to the bondholders,are called:

Correct AnswerverifiedShow Answer

A corporation issued 8% bonds with a par value of $1,000,000,receiving a $20,000 premium.On the interest date 5 years later,after the bond interest was paid and after 40% of the premium had been amortized,the corporation called the bonds at $990,000.The gain or loss on this retirement is:

Correct AnswerverifiedShow Answer

On January 1,Parson Freight Company issues 7%,10-year bonds with a par value of $2,000,000.The bonds pay interest semiannually.The market rate of interest is 8% and the bond selling price was $1,864,097.The bond issuance should be recorded as:

Correct AnswerverifiedShow Answer

Bonds issued in the names and addresses of their holders are ________ bonds.

Correct AnswerverifiedShow Answer

The issue price of bonds is found by computing the future value of the bond's cash payments,discounted at the contract rate of interest.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverified Cash payment: $720,000 * 10% ...View AnswerShow Answer

Morgan Company issues 9%,20-year bonds with a par value of $750,000 that pay interest semiannually.The amount paid to the bondholders for each semiannual interest payment is.

Correct AnswerverifiedShow Answer

Bonds that give the issuer an option of retiring them before they mature are:

Correct AnswerverifiedShow Answer

All of the following statements regarding leases are true except:

Correct AnswerverifiedShow Answer

A contract pledging title to assets as security for a note or bond is known as a(an) :

Correct AnswerverifiedShow Answer

The relationship between the market rate of a bond and the rate of return on the borrowed funds affects the company's return on equity.

Correct AnswerverifiedShow Answer

Callable bonds give the issuer the option to retire them at a stated dollar amount before maturity.

Correct AnswerverifiedShow Answer

Correct Answer
verified
The advantages of bond financing include...
View Answer

Correct Answer
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$1,000,000...
View Answer

Correct Answer
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Correct Answer
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Payments on an installment note include ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Cash payment: $720,000 * 10% ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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